We are back to the 1990s with Wintel, except this time it is the data center, not the personal computer. That's the true takeaway of last night's conference calls from the big dogs, Microsoft (MSFT) , Intel (INTC) and Amazon (AMZN) .
Yep you have to go back to the 286, 386, 486 and Pentium to remember when you had conference calls where the CEOs of Intel couldn't meet an insatiable desire of their clients for their wares. As a rapturous Brian Krzanich from Intel crowed last night "unrelenting demand for computing performance driven by the continued growth of data and the need to process, analyze and store and share that data," has made it so Intel has to go full out to make chips for the data center, which grew 24% and the cloud, which zoomed 45% and the comm service provider group 33%. The average selling prices are extremely high for these chips relative to the personal computer business which had low single digits despite a declining total addressable market but the average selling price there, too, was very large.
Microsoft crushed it in cloud growth because as CEO Satya Nadella pointed, "we're still in the early innings of cloud transition." That allowed Microsoft to have 10% organic growth.
What can I say about Amazon? Sales up 43% to $51 billion? This is one of the largest companies in the world. They made $1.9 Billion versus 1 billion? Again it's the cloud: active users increased 250% which is what happens when Amazon Web Services has a seven year head start over the competition of Alphabet's (GOOGL) Google Web Services, Microsoft's Azure and IBM (IBM) . "As a result the Amazon Web Services are by far the most evolved and most functionally-rich," Jeff Bezos said in his release. He said AWS has a "remarkable acceleration for two quarters in a row."
Yep, it is as if the whole PC cycle and the internet cycle were happening all at once, a compression of the 1990s when tech wouldn't quit and you got phenomenal returns from Intel and Microsoft and now add in Amazon.
So then why was tech so weak for so long until these companies? Uniquely, Microsoft and Intel missed the cellphone cycle. They were too busy developing other imperatives that turned out to have very little growth, notably the personal computer. It's pretty astounding that the PC had a resurgence this year, which is an unexpected windfall. But WINTEL's didn't miss the data center. Plus Microsoft picked up the accelerating LinkedIn and was able to profit from an accelerating gaming cycle with almost 60 million Xboxes. Intel chose to diversify into the autonomous driving fray with Mobileye (MBBYF) , another example of being in the right, accelerating markets.
Of course Amazon had the adjacencies of artificial intelligence devices, as well as the obvious Amazon Prime, which had a price increase that will most definitely stick because it is a bargain enjoyed by 100 million people - although the price increase will only initially impact newbies - $119 - and Amazon advertising, the newest grower.
Altogether three things stick out about these companies: 1. Insane demand which, 2. Gives them pricing power, and 3. is still in the early innings. It's not the first, but I can make the case it is the third or fourth inning.
That would put it right when the PC and the internet converged and few believed that we were anything other than in the ninth inning. The skepticism was thick.
The skepticism is thick now, with investors confusing the cloud growth as late, not early, just like they did the personal computer growth when we were probably just embracing the Pentium in 1993.
Back then nobody believed given the double that Intel's stock had after the 486. But they were wrong. Because the double went from about $1.5 to $3. Seven years later Intel was at $72.
No, that won't happen again. Nevertheless you understand that the 486 to the Pentium move was totally unexpected and thought to be a desperate move by Intel to force people to upgrade.
It turned out it was about demand which allowed average selling prices to gain on each iteration, just like now. Then CEO Andy Grove said when Intel transitioned into the Pentium that we were in the early innings just like Satya Nadella said last night. It sounded fatuous.
It turned out they weren't in the early innings. It was literally the end of the first inning.
They were too negative.
What an era.
Yet it has nothing, nothing on this one.
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